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New UserCoal: After the surge, how low can it go?
17 Nov 2016
A wave that has lifted some coal prices to more than double in the last six months may be about to ebb away, turned back by China's move to loosen the restrictions on domestic mining that first triggered the fuel's rise.
Australian Newcastle cargo prices, Asia's benchmark, have fallen 7.8 percent in November already, slipping to $105.75 per metric ton from almost $115 at the start of the month, their highest since 2012.
On Thursday, China's state planner moved to ease production curbs ahead of peak winter demand for heating fuels, allowing mines 54 more working days a year.
It was a Beijing move earlier this year to cap domestic mining to cut excess capacity that had triggered coal's rise as utilities in the region, especially in South Korea and Japan, began to stock up.
"The strong pricing rebound since early 2016 is unlikely to be sustained as the Chinese government relaxes its working-day curtailment policies to manage prices," Fitch Ratings said in a note to clients.
"Going forward, much will now depend on the weather outlook in northern Asia, where the peak demand winter season has just started. Overall I think this will be a bumpy winter price ride" said a trader with a commodity shipper.
The winter outlook for China and South Korea is for unusually cold weather into December, although the outlook for Japan is more within the seasonal norms, meteorological data in Thomson Reuters Eikon showed.
"As China said it would increase production, prices are down. Besides that, demand has also declined because most (utilities) have procured their winter supplies," said a source with a South Korean utility.
Source:Reuters